House Financial Services Committee Chairman Jeb Hensarling (R-Texas) yesterday paved the way to break the bottleneck on housing finance reform when he reluctantly acknowledged that Congress is unlikely to pass the PATH Act and that a final package would likely contain a limited federal backstop that protects the 30-year mortgage.

“I continue to believe that a government guarantee in the secondary mortgage market remains a bad idea, a risky idea, and an unneeded idea,” Hensarling said at a conference on the future of the U.S. housing market. “I also believe the idea is not going away anytime soon and I fully expect it be part of any successful reform effort in this Congress.”

Hensarling added that “any new government guarantee must be limited to catastrophic losses” and said that he has no doubt that policies in a reform package will ensure that the 30-year fixed-rate mortgage “both survives and thrives.”

While Hensarling continues to support the PATH Act, housing finance reform legislation opposed by NAHB in part because it lacks a federal backstop for the housing finance system, the chairman conceded that the PATH Act cannot move forward in Congress.

Moreover, he expressed support for a bipartisan approach. “I stand ready to negotiate … with any other stakeholder that shares my belief that America deserves a sustainable housing finance system, and deserves one now.”

Just last month, NAHB CEO Jerry Howard testified before the House Financial Services Committee’s Subcommittee on Housing and Insurance, where he called on lawmakers to make housing finance reform a top priority.

NAHB will continue to remain deeply engaged in the debate and work with Hensarling and other House and Senate leaders to move the process forward.